Moody's: Longer Medicare Solvency Good News for Nonprofit Hospitals

Following the latest report from the Medicare Board of Trustees extending the projected solvent lifespan of the Hospital Insurance Trust Fund from 2024 to 2026, Moody's Investors Service rated the trustees' findings as credit positive for nonprofit hospitals, which lately have seen a slew of negative harbingers for their credit future.

Nonprofit hospitals should find the news especially favorable for their future balance sheets, as Medicare is the single largest payer for most of them, contributing 44 percent of gross revenues on average, according to Moody's Vice President and Senior Analyst Mark Pascaris in a report on the matter.

In addition, Medicare's slightly less imminent funding collapse reduces political pressure on Congress to make further cuts to the program, protecting a sizeable portion of nonprofit hospitals' revenue streams, Mr. Pascaris wrote.

However, as the Congressional Budget Office places Medicare and Medicaid as the single largest national expense at 23 percent of the federal budget, Mr. Pascaris wrote. Moody's expects Medicare will not be immune to cuts, especially as the number of beneficiaries grows from about 50 million last year to as many as 73 million by 2025 — the year before Medicare is predicted to run out.

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